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Effects of a Change in the Composition of IMKB 30 on Stock Performance

Baris Teke

Istanbul Stock Exchange Review, 2013, vol. 13, issue 51, 21-57

Abstract: A total of 60 incidents, of which 29 were additions to and 31 were exclusions from the index have been analyzed during the 23 index periods of ÝMKB 30 between the years 2005-2011. General conclusion is that announcements of change and the days of change do not have a significant impact on stock returns and transaction volumes during the period of analysis. It has been observed that additions to the index increase the transaction volume more than exclusions from it. It is believed that the investors predict the stocks that would be added to (excluded from) the index and adjust the prices accordingly before the change occurs. Besides, the effects of institutional investors that make transactions based on the index, including exchange traded funds, are limited. Effects of a change in index composition have been observed to be limited on the days of announcement and actual change and it is believed that the market has semi-strong form of efficiency. No proof could be identified on the validity of Price Pressure Hypothesis, Imperfect Substitutes Hypothesis or other hypotheses.

Keywords: ÝMKB 30 (ISE 30); market model; event study methodology; index composition; index changes; price and volume effects; efficient market hypothesis (search for similar items in EconPapers)
JEL-codes: G00 (search for similar items in EconPapers)
Date: 2013
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Handle: RePEc:bor:iserev:v:13:y:2013:i:51:p:21-57